Key events in September 2024
- Global share prices delivered solid returns in September, but this was largely driven by the strong gains in American and Chinese markets. The Federal Reserve’s 0.5% cut to US cash interest rates was the primary driver of Wall Street’s share gains. The Chinese central bank’s announcement of lower interest rates on September 24th started a dramatic 23.3% monthly gain in share prices with hopes that this would stimulate China’s economic activity and the struggling property market. Escalating conflict in the Middle East and Ukraine remain key concerns but lower interest rates for now are soothing geo-political risks.
- US shares hit record highs in September given lower interest rate settings by the central bank. Milder jobs growth and moderate inflation results for August generated optimism that the central bank will be significantly lowering interest rates over coming months.
- Chinese shares skyrocketed with the central bank announcing interest rate cuts and more generous reserve requirements for banks to support lending. Promises of more government spending to support economic activity also generated optimism for shares. The motivation for these new measures was China’s recent subdued economic activity and continuing weakness in apartment construction and prices. By contrast, Japanese share markets declined in September but this comes after sharp gains earlier this year.
- Australian shares made strong gains in September primarily on the back of China’s stimulus measures. Notably the Resources sector made robust returns of 11.5% in September on optimism that China’s stimulus measures will boost key commodity prices such as iron ore and metals. There were also sharp gains for the Information Technology and Real Estate sectors with hopes of lower global interest rates.
- Australia’s sedate economic performance and milder inflation is also constructive for lower cash interest rates eventually. Australia struggled with slow economic activity in the June quarter with annual Real GDP growth at only 1%. Recent retail spending has also been disappointing given the ‘cost of living’ pressures. The ABS monthly CPI indicator showed inflation at 2.7% in August which is the lowest in the past 3 years.
Asset class summary
Asset class returns in Australian dollars – periods to 30 September 2024
| CYTD % | 1 month
% |
3 months
% |
1 year
% |
3 years
pa % |
5 years
pa % |
10 years
pa % |
|
| Australian shares | 12.3 | 3.1 | 7.8 | 21.7 | 8.1 | 8.3 |
8.9 |
| Global shares (hedged) | 18.2 | 1.8 | 4.7 | 28.5 | 7.5 | 10.8 |
9.8 |
| Global shares (unhedged) | 16.7 | 0.1 | 2.6 | 22.6 | 9.6 | 11.6 |
12.0 |
| Emerging markets (unhedged) | 14.9 | 4.3 | 4.7 | 17.3 | 1.8 | 5.2 |
6.5 |
| Australian property securities | 25.3 | 6.5 | 14.3 | 45.9 | 8.8 | 7.2 |
10.5 |
| Global property securities (hedged) | 11.1 | 2.5 | 13.5 | 25.2 | 0.1 | 0.3 |
4.6 |
| Global listed infrastructure (hedged) | 16.0 | 2.1 | 11.8 | 25.8 | 5.8 | 4.0 |
6.9 |
| Australian bonds | 3.2 | 0.3 | 3.0 | 7.1 | -1.2 | -0.4 |
2.4 |
| Global bonds (hedged) | 3.5 | 1.1 | 4.0 | 9.1 | -1.5 | -0.4 |
2.3 |
| Global high yield bonds (hedged) | 5.8 | 1.0 | 4.0 | 12.7 | 1.1 | 3.0 |
4.5 |
| Australian inflation-linked bonds | 2.6 | 0.5 | 2.6 | 6.3 | 2.3 | 2.4 |
2.9 |
| Cash | 3.3 | 0.4 | 1.1 | 4.4 | 2.8 | 1.8 |
1.9 |
| AUD/USD | 1.7 | 2.2 | 3.9 | 7.5 | -1.3 | 0.6 |
-2.3 |
Past performance is not a reliable indicator of future performance. Sources: Australian shares – S&P/ASX 300 Total Return Index; Global shares (hedged) – MSCI All Countries World (A$ hedged, Net); Global shares (unhedged) – MSCI All Countries World in A$ (Net); Emerging markets – MSCI Emerging Markets in A$ (Net); Australian property securities – S&P/ASX 300 A-REIT Accumulation Index; Global property securities – FTSE EPRA/NAREIT Developed (A$ hedged, Net); Global listed infrastructure – FTSE Global Core Infrastructure 50/50 (Hedged $A); Australian bonds – Bloomberg AusBond Composite 0+ Yr Index; Global bonds (A$ hedged) – Barclays Global Aggregate (A$ hedged, Gross); Global high yield bonds (A$ hedged) – Barclays US High Yield Ba/B Cash Pay x Financials ($A Hedged); Australian inflation-linked bonds – Bloomberg AusBond Inflation Government 0+ Yr Index; Cash – Bloomberg AusBond Bank Bill Index; AUD/USD – WM/Reuters Daily (4 pm GMT).)
Key events in global markets over the last three months to September
Global shares achieved strong gains over the quarter despite concerns over the conflicts in the Middle East and Ukraine. Optimism on ‘Artificial Intelligence’ (AI) prospects, milder inflation outcomes, and both the American and European central banks cutting interest rates were the key drivers for higher global share prices.
Global shares (hedged) recorded a strong 4.7% return for the quarter. However, a stronger Australian dollar particularly against the US dollar restrained the global shares (unhedged) return to only 2.6% for the quarter.
Wall Street’s benchmark S&P 500 Index made historic highs and delivered a very strong 5.8% quarterly return in local currency terms with the exuberant optimism on AI and technology shares.
European shares delivered a solid return. Investors gained solace in milder inflation and the European Central Bank (ECB) cutting interest rates. However, political risks with the Russia-Ukraine War cast a shadow over European share prices.
Asian share markets delivered mixed performances. Chinese shares made an extraordinary recovery in September which allowed China’s MSCI index to deliver an astonishing 22.2% quarterly return in local currency terms. Finally, Chinese central banks responded to slow economic activity and weak property markets by assertively cutting interest rates. However, Japanese share markets delivered a -6% return for the quarter in local currency terms given concerns over higher interest rate settings by the Japanese central bank.
Global bonds (hedged) posted a strong 4% quarterly return. Bond investors were comforted by lower inflation readings in the United States and in Europe. Australian bonds posted a solid 3% return for the quarter largely on the back of lower global inflation as well as subdued Australian economic activity results.
Key events in Australia over the last three months to September
Australian shares delivered a strong quarterly return of 7.8%. The Information Technology sector made a very strong quarterly return of 15.3% on AI optimism. Real Estate Investment Trusts (REITS) were next best with a 14.5% quarterly return given that lower global interest rates raised hopes for eventual interest rate cuts in Australia. Financial sector shares, that include the banks, also made a very strong 8.3% quarterly gain on lower interest rate hopes. Even Resource sector shares were boosted by China’s stimulus announcements in September which generated a 7.1% gain. However, there were some disappointments with the Energy sector delivering returns of -6.4% given falling global oil prices.
Australia’s economy continued to display subdued economic activity with sluggish consumer spending and weak housing construction. The negative impact of high consumer prices, mortgage interest rates and rents continued to squeeze household budgets. However, lower inflation results for August has generated optimism that the Reserve Bank of Australia will become more open to lowering interest rates in early 2025.
Global prospects
Global share prices have made strong gains this year despite some considerable headwinds. The enthusiasm for AI and technology are the key positive contributors to share prices. There is also confidence that inflation is gradually falling across the world which allows central banks to cut interest rates. A lower interest rate environment would be more supportive of corporate profits and thereby share prices.
However, these exuberant expectations may be challenged by considerable global political risks over coming months with the continuing Russian-Ukraine war as well as escalating conflict in the Middle East between Israel, Hamas, Hezbollah and Iran. The US Congressional and Presidential elections in November are also likely to prove influential for global economic stability and investor sentiment.
Given these complex and significant risks, investors should maintain a disciplined and diversified strategy.
Important information This communication is provided by MLC Investments Limited (ABN 30 002 641 661, AFSL 230705) (MLC), part of the Insignia Financial Group of companies (comprising Insignia Financial Ltd, ABN 49 100 103 722 and its related bodies corporate) (‘Insignia Financial Group’). An investment with MLC does not represent a deposit or liability of, and is not guaranteed by, the Insignia Financial Group. This information may constitute general advice. It has been prepared without taking account of an investor’s objectives, financial situation or needs and because of that an investor should, before acting on the advice, consider the appropriateness of the advice having regard to their personal objectives, financial situation and needs. Past performance is not a reliable indicator of future performance. Share market returns are all in local currency. Any opinions expressed in this communication constitute our judgement at the time of issue and are subject to change. We believe that the information contained in this communication is correct and that any estimates, opinions, conclusions or recommendations are held or made as at the time of compilation. However, no warranty is made as to their accuracy or reliability (which may change without notice), or other information contained in this communication. This information is directed to and prepared for Australian residents only. MLC may use the services of any member of the Insignia Financial Group where it makes good business sense to do so and will benefit customers. Amounts paid for these services are always negotiated on an arm’s length basis. MLC relies on third parties to provide certain information and is not responsible for its accuracy, nor is MLC liable for any loss arising from a person relying on information provided by third parties. Bloomberg Finance L.P. and its affiliates (collectively, “Bloomberg”) do not approve or endorse any information included in this material and disclaim all liability for any loss or damage of any kind arising out of the use of all or any part of this material. The funds referred to herein is not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds.